CRNS Cronos Grp. S A (MM)

The Cronos Group (Nasdaq:CRNS) today reported net income of $2.8 million, or $0.34 per diluted share, for the quarter ended September 30, 2006, compared to $2.2 million, or $0.27 per diluted share, for the corresponding period in 2005. In addition, on November 9, 2006, the Board of Directors declared a dividend of $0.07 per common share, payable on January 10, 2007, for the fourth quarter of 2006 to shareholders of record as of the close of business on December 29, 2006, and a dividend of $0.08 per common share, payable on April 10, 2007, for the first quarter of 2007 to shareholders of record as of the close of business on March 23, 2007. Gross lease revenue for the third quarter was $35.9 million, an increase of 3% over the corresponding quarter of 2005, reflecting the growth of the Company�s specialized container fleet and continued strong utilization rates. The utilization of the combined container fleet finished the third quarter at 93% as Cronos experienced high levels of demand for all container types. Direct operating expenses declined by $1.1 million or 25% when compared with the third quarter of 2005 due to fewer container redeliveries and reduced inventory levels. Net income for the third quarter of 2006 was $0.6 million higher than in the same period of 2005 due to a $0.7 million decline in Selling, General & Administrative expenses. The Company added $114.5 million of new container equipment to its fleet during the first nine months of 2006, with specialized equipment (comprising refrigerated, tank, and dry freight special containers) representing 85% of the new acquisitions. The Company�s Joint Venture Program continues to be the primary funding source for container acquisitions and, accordingly, earnings from this program have increased in line with the growth in its fleet size. The Company�s share of earnings from the Joint Venture Program increased to $4.2 million for the first nine months of 2006 from $2.7 million for the corresponding period of 2005. On November 8, 2006, the maximum debt commitment to the Joint Venture Program was increased from $300 million to $350 million, and the interest rate margin for this facility was reduced by 37.5 basis points to a margin of 125 basis points over Libor (the London Inter-bank Offered rate). Gross lease revenue was $106.2 million for the first nine months of 2006, an increase of 3% over the same period in 2005. Net income for the nine months ended September 30, 2006 was $7.8 million, or $0.96 per diluted share, compared to $9.3 million, or $1.17 per diluted share for the comparable period in 2005. The decline in net income when compared to prior year included the impact of increased interest rates and a reduction in the level of profit recorded on the disposition of container assets. Net income for the first nine months of 2006 included $0.9 million of legal fees relating primarily to the resolution of legal claims. Net income for the first nine months of 2005 included $2.1 million of non-operating income that was recognized at the conclusion of legal actions, $1.6 million of litigation-related legal expenses and $0.8 million in respect of one-off termination expenses relating to involuntary employee terminations. These items had the effect of reducing net income by $0.3 million. Cronos is one of the world's leading lessors of intermodal containers, owning and managing a fleet of over 440,000 TEU (twenty-foot equivalent units). The diversified Cronos fleet of dry cargo, refrigerated and other specialized containers is leased to a customer base of over 450 ocean carriers and transport operators around the world. Cronos provides container-leasing services through an integrated network of offices using state-of-the-art information technology. This release discusses certain forward-looking matters that involve risks and uncertainties that could cause actual results to vary materially from estimates. Risks and uncertainties include, among other things, changes in international operations, exchange rate risks, changes in market conditions for the Company's container lease operations and the Company's ability to provide innovative and cost-effective solutions. For further discussion of the risk factors attendant to an investment in the Company's Common shares, see the Business section in Part I (particularly Item 1A, �Risk Factors�) of the Company's Annual Report on Form 10-K for the year ended December 31, 2005, which was filed with the SEC on March 30, 2006. This press release and other information concerning Cronos can be viewed on Cronos' website at www.cronos.com The Cronos Group � Condensed Unaudited Consolidated Statements of Income (US dollar amounts in thousands, except per share amounts) � Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� 2006� 2005� ________ ________ ________ ________ Gross lease revenue $35,947� $35,007� $106,249� $103,480� Equipment trading revenue 526� 260� 3,901� 2,210� Commissions, fees and other income: - Related parties 209� 209� 541� 614� - Unrelated parties 1,131� 1,187� 3,371� 3,737� - Gain on settlement of litigation -� -� -� 1,333� ________ ________ ________ ________ Total revenues 37,813� 36,663� 114,062� 111,374� ________ ________ ________ ________ � Direct operating expenses 3,179� 4,264� 12,494� 13,504� Payments to Managed Container Programs: - Related parties 15,135� 11,381� 41,486� 27,816� - Unrelated parties 7,848� 9,177� 23,049� 27,281� Equipment trading expenses 493� 227� 3,454� 1,978� Depreciation and amortization 2,978� 3,293� 8,879� 12,463� Selling, general and administrative expenses 4,951� 5,635� 15,100� 16,337� Interest expense 1,844� 1,562� 5,343� 4,937� Recovery of amount payable to Managed Container Program -� -� -� (703) ________ ________ ________ ________ Total expenses 36,428� 35,539� 109,803� 103,613� ________ ________ ________ ________ Income before income taxes and equity in earnings of affiliate 1,385� 1,124� 4,257� 7,761� Income taxes (208) (169) (639) (1,154) Equity in earnings of unconsolidated affiliate 1,576� 1,238� 4,187� 2,692� ________ ________ ________ ________ Net income 2,753� 2,193� 7,805� 9,299� Basic net income per common share $0.36� $0.30� $1.04� $1.26� Diluted net income per common share $0.34� $0.27� $0.96� $1.17� The Cronos Group � Condensed Unaudited Consolidated Balance Sheets (US dollar amounts in thousands, except per share amounts) � � � September 30, December 31, 2006� 2005� Assets Cash and cash equivalents $12,739� $15,829� Restricted cash 250� 4,200� Amounts due from lessees, net 28,958� 28,540� Amounts receivable from Managed Container Programs 2,258� 3,391� New container equipment for resale 18,386� 38,142� Net investment in direct financing leases 13,005� 12,678� Investments in unconsolidated affiliates 41,426� 31,358� Container equipment, net 121,624� 121,988� Other equipment, net 660� 1,130� Goodwill 11,038� 11,038� Other intangible assets, net 205� 345� Other assets 4,039� 3,093� Total assets $254,588� $271,732� � Liabilities and shareholders� equity Amounts payable to Managed Container Programs 25,812� 25,462� Amounts payable to container manufacturers 26,924� 52,790� Direct operating expense payables and accruals 3,886� 5,432� Other amounts payable and accrued expenses 5,408� 11,873� Debt and capital lease obligations 96,970� 87,780� Current and deferred income taxes 3,131� 3,174� Deferred income and unamortized acquisition fees 7,396� 7,684� Total liabilities 169,527� 194,195� � Shareholders� equity Common shares issued 15,347� 15,040� Additional paid-in capital 43,489� 43,807� Common shares held in treasury (297) (297) Accumulated other comprehensive income 610� 880� Restricted retained earnings 1,832� 1,832� Retained earnings 24,080� 16,275� Total shareholders� equity 85,061� 77,537� Total liabilities and shareholders� equity $254,588� $271,732� The Cronos Group (Nasdaq:CRNS) today reported net income of $2.8 million, or $0.34 per diluted share, for the quarter ended September 30, 2006, compared to $2.2 million, or $0.27 per diluted share, for the corresponding period in 2005. In addition, on November 9, 2006, the Board of Directors declared a dividend of $0.07 per common share, payable on January 10, 2007, for the fourth quarter of 2006 to shareholders of record as of the close of business on December 29, 2006, and a dividend of $0.08 per common share, payable on April 10, 2007, for the first quarter of 2007 to shareholders of record as of the close of business on March 23, 2007. Gross lease revenue for the third quarter was $35.9 million, an increase of 3% over the corresponding quarter of 2005, reflecting the growth of the Company's specialized container fleet and continued strong utilization rates. The utilization of the combined container fleet finished the third quarter at 93% as Cronos experienced high levels of demand for all container types. Direct operating expenses declined by $1.1 million or 25% when compared with the third quarter of 2005 due to fewer container redeliveries and reduced inventory levels. Net income for the third quarter of 2006 was $0.6 million higher than in the same period of 2005 due to a $0.7 million decline in Selling, General & Administrative expenses. The Company added $114.5 million of new container equipment to its fleet during the first nine months of 2006, with specialized equipment (comprising refrigerated, tank, and dry freight special containers) representing 85% of the new acquisitions. The Company's Joint Venture Program continues to be the primary funding source for container acquisitions and, accordingly, earnings from this program have increased in line with the growth in its fleet size. The Company's share of earnings from the Joint Venture Program increased to $4.2 million for the first nine months of 2006 from $2.7 million for the corresponding period of 2005. On November 8, 2006, the maximum debt commitment to the Joint Venture Program was increased from $300 million to $350 million, and the interest rate margin for this facility was reduced by 37.5 basis points to a margin of 125 basis points over Libor (the London Inter-bank Offered rate). Gross lease revenue was $106.2 million for the first nine months of 2006, an increase of 3% over the same period in 2005. Net income for the nine months ended September 30, 2006 was $7.8 million, or $0.96 per diluted share, compared to $9.3 million, or $1.17 per diluted share for the comparable period in 2005. The decline in net income when compared to prior year included the impact of increased interest rates and a reduction in the level of profit recorded on the disposition of container assets. Net income for the first nine months of 2006 included $0.9 million of legal fees relating primarily to the resolution of legal claims. Net income for the first nine months of 2005 included $2.1 million of non-operating income that was recognized at the conclusion of legal actions, $1.6 million of litigation-related legal expenses and $0.8 million in respect of one-off termination expenses relating to involuntary employee terminations. These items had the effect of reducing net income by $0.3 million. Cronos is one of the world's leading lessors of intermodal containers, owning and managing a fleet of over 440,000 TEU (twenty-foot equivalent units). The diversified Cronos fleet of dry cargo, refrigerated and other specialized containers is leased to a customer base of over 450 ocean carriers and transport operators around the world. Cronos provides container-leasing services through an integrated network of offices using state-of-the-art information technology. This release discusses certain forward-looking matters that involve risks and uncertainties that could cause actual results to vary materially from estimates. Risks and uncertainties include, among other things, changes in international operations, exchange rate risks, changes in market conditions for the Company's container lease operations and the Company's ability to provide innovative and cost-effective solutions. For further discussion of the risk factors attendant to an investment in the Company's Common shares, see the Business section in Part I (particularly Item 1A, "Risk Factors") of the Company's Annual Report on Form 10-K for the year ended December 31, 2005, which was filed with the SEC on March 30, 2006. This press release and other information concerning Cronos can be viewed on Cronos' website at www.cronos.com -0- *T The Cronos Group Condensed Unaudited Consolidated Statements of Income (US dollar amounts in thousands, except per share amounts) Three Months Nine Months Ended Ended September 30, September 30, 2006 2005 2006 2005 ________ ________ ________ ________ Gross lease revenue $35,947 $35,007 $106,249 $103,480 Equipment trading revenue 526 260 3,901 2,210 Commissions, fees and other income: - Related parties 209 209 541 614 - Unrelated parties 1,131 1,187 3,371 3,737 - Gain on settlement of litigation - - - 1,333 ________ ________ ________ ________ Total revenues 37,813 36,663 114,062 111,374 ________ ________ ________ ________ Direct operating expenses 3,179 4,264 12,494 13,504 Payments to Managed Container Programs: - Related parties 15,135 11,381 41,486 27,816 - Unrelated parties 7,848 9,177 23,049 27,281 Equipment trading expenses 493 227 3,454 1,978 Depreciation and amortization 2,978 3,293 8,879 12,463 Selling, general and administrative expenses 4,951 5,635 15,100 16,337 Interest expense 1,844 1,562 5,343 4,937 Recovery of amount payable to Managed Container Program - - - (703) ________ ________ ________ ________ Total expenses 36,428 35,539 109,803 103,613 ________ ________ ________ ________ Income before income taxes and equity in earnings of affiliate 1,385 1,124 4,257 7,761 Income taxes (208) (169) (639) (1,154) Equity in earnings of unconsolidated affiliate 1,576 1,238 4,187 2,692 ________ ________ ________ ________ Net income 2,753 2,193 7,805 9,299 ======== ======== ========= ========= Basic net income per common share $0.36 $0.30 $1.04 $1.26 ======== ======== ========= ========= Diluted net income per common share $0.34 $0.27 $0.96 $1.17 ======== ======== ========= ========= *T -0- *T The Cronos Group Condensed Unaudited Consolidated Balance Sheets (US dollar amounts in thousands, except per share amounts) September 30, December 31, 2006 2005 ------------- ------------ Assets Cash and cash equivalents $12,739 $15,829 Restricted cash 250 4,200 Amounts due from lessees, net 28,958 28,540 Amounts receivable from Managed Container Programs 2,258 3,391 New container equipment for resale 18,386 38,142 Net investment in direct financing leases 13,005 12,678 Investments in unconsolidated affiliates 41,426 31,358 Container equipment, net 121,624 121,988 Other equipment, net 660 1,130 Goodwill 11,038 11,038 Other intangible assets, net 205 345 Other assets 4,039 3,093 ------------- ------------ Total assets $254,588 $271,732 ============= ============ Liabilities and shareholders' equity Amounts payable to Managed Container Programs 25,812 25,462 Amounts payable to container manufacturers 26,924 52,790 Direct operating expense payables and accruals 3,886 5,432 Other amounts payable and accrued expenses 5,408 11,873 Debt and capital lease obligations 96,970 87,780 Current and deferred income taxes 3,131 3,174 Deferred income and unamortized acquisition fees 7,396 7,684 ------------- ------------ Total liabilities 169,527 194,195 ------------- ------------ Shareholders' equity Common shares issued 15,347 15,040 Additional paid-in capital 43,489 43,807 Common shares held in treasury (297) (297) Accumulated other comprehensive income 610 880 Restricted retained earnings 1,832 1,832 Retained earnings 24,080 16,275 ------------- ------------ Total shareholders' equity 85,061 77,537 ------------- ------------ Total liabilities and shareholders' equity $254,588 $271,732 ============= ============ *T